Moses Kagan on Real Estatehttp://kagansblog.com
Buying, renovating, managing and selling apartment buildingsTue, 31 Mar 2015 17:26:10 +0000en-UShourly1http://wordpress.org/?v=4.1.1Why I love my jobhttp://kagansblog.com/2015/03/why-i-love-my-job/
http://kagansblog.com/2015/03/why-i-love-my-job/#commentsTue, 31 Mar 2015 17:26:10 +0000http://kagansblog.com/?p=2574One of the best things about my job is that it forces me to learn new things all the time. Today, I need to review a proposed Tenants-in-Common (“TIC”) agreement that will govern the relationship between two entities which will jointly own a property we intend to renovate. I have never seen a TIC agreement

]]>One of the best things about my job is that it forces me to learn new things all the time.

Today, I need to review a proposed Tenants-in-Common (“TIC”) agreement that will govern the relationship between two entities which will jointly own a property we intend to renovate.

I have never seen a TIC agreement before. But this does not scare me.

Why?

Because I never saw a purchase agreement before my first deal, never saw an operating agreement before I set up my first LLC, never saw a K1 before I had to send out my first to an investor, etc.

Each time I confront some new challenge in our business, I do the best I can to learn what I need to know to arrive at a decent solution. I don’t expect to achieve perfection; I just aim to do well enough to move the business forward while avoiding catastrophic mistakes.

There are two key benefits to proceeding in this manner. The first is obvious: By be willing to live with “good enough”, I avoid getting hung up on the minutia of any one deal, allowing us to do more deals.

The second benefit is to my personal growth. Every time I do one of these things for the first time, I learn. And every time I succeed at doing something new, I gain more confidence that I can successfully overcome new challenges.

]]>http://kagansblog.com/2015/03/why-i-love-my-job/feed/0Another trip to SF and why I hate setbackshttp://kagansblog.com/2015/03/comparing-la-to-sf/
http://kagansblog.com/2015/03/comparing-la-to-sf/#commentsMon, 30 Mar 2015 16:33:25 +0000http://kagansblog.com/?p=2572Just got back from a trip to NorCal, during which I drove through San Francisco twice. Could not stop staring at the buildings, which are generally built all the way to the lot lines in the front and on the sides of the parcels. It’s just shocking how much better a city looks with no

]]>http://kagansblog.com/2015/03/comparing-la-to-sf/feed/0Using a little leveragehttp://kagansblog.com/2015/03/using-a-little-leverage/
http://kagansblog.com/2015/03/using-a-little-leverage/#commentsThu, 26 Mar 2015 22:20:48 +0000http://kagansblog.com/?p=2570Regular readers know I’m not a big fan of leverage. Yes, it has the ability to dramatically improve your results in upside scenarios. But I got started in this business during a total wipe-out and I’m determined not to expose myself or my investors to any real risk of losing properties in the event of

Yes, it has the ability to dramatically improve your results in upside scenarios. But I got started in this business during a total wipe-out and I’m determined not to expose myself or my investors to any real risk of losing properties in the event of another one.

For that reason, and because we were not financially strong nor operationally experienced in the beginning, we have done all of our rehab deals all cash. That is to say, we bought the properties with cash and funded the renovations with cash.

The fact that we have achieved such good results without using any leverage is indicative of the fact that we add a lot of value to deals and also that our timing has been good.

But doing everything with cash is a little crazy, because the additional risk from, say, 50% leverage is minimal and the impact on returns is still pretty nice.

So, tomorrow we’re embarking on a new phase in Adaptive’s history. We found a private investor willing to do a reasonably-priced, low LTV bridge loan on the first rehab deal in Fund 3.

Making the deal was a little expensive and time-consuming, but I believe it will serve as a template for other, similar loans going forward, which should have major benefits for our investors and, ultimately, for Adaptive itself.

]]>http://kagansblog.com/2015/03/using-a-little-leverage/feed/0How we would enter a new cityhttp://kagansblog.com/2015/03/how-adaptive-would-enter-a-new-city/
http://kagansblog.com/2015/03/how-adaptive-would-enter-a-new-city/#commentsTue, 24 Mar 2015 19:21:52 +0000http://kagansblog.com/?p=2567Have been thinking about what it would take for us to learn a new city. Other people do this by reviewing research reports and then visiting a few times for broker tours. That is not how we would do it. We would start with research in order to narrow down the choices to those cities

]]>http://kagansblog.com/2015/03/how-adaptive-would-enter-a-new-city/feed/0Keep chopping woodhttp://kagansblog.com/2015/03/keep-chopping-wood/
http://kagansblog.com/2015/03/keep-chopping-wood/#commentsMon, 23 Mar 2015 16:18:41 +0000http://kagansblog.com/?p=2565We basically do the same deal over and over again. We find some screwed-up building in an improving neighborhood, we figure out how to renovate it, and then we lease and manage it. Because the deals are so similar, it’s easy to start to get bored. After all, smart people generally appreciate novelty, learning, etc.

]]>We basically do the same deal over and over again. We find some screwed-up building in an improving neighborhood, we figure out how to renovate it, and then we lease and manage it.

Because the deals are so similar, it’s easy to start to get bored. After all, smart people generally appreciate novelty, learning, etc. So banging out the same renovation a million times can get old.

But that’s a feeling to guard against.

Why? Well, in business, success is contingent. Things that have worked (eg created profits) for years suddenly turn unprofitable due to market conditions, regulation, etc. Look at what happened to Kodak, Radio Shack, Country-Wide, etc.

Once you get bumped out of a profitable groove, it can be very difficult to find another one.

So, if you’ve got something that really, truly works, it’s not a bad idea to keep chopping wood until it stops working.